J.C. Penney Co. Inc. has closed on a five-year $2.35 billion credit facility that it said provides better pricing terms and later maturities than its predecessor.
The new facility consists of a $1.85 billion revolving line of credit and a $500 million term loan. It replaces a $1.85 billion credit facility scheduled to mature in April 2016.
Funds from the term loan will be used to pay down the cash borrowings of the previous facility, and the revolving line of credit will be available for working capital and general corporate purposes, Penney’s said.
“We proactively pursued this new facility to extend the maturity several years and further enhance our liquidity position, particularly during periods of peak working capacity needs,” said Ed Record, who was appointed executive vice president and chief financial officer of Plano, Tex.-based Penney’s in February. He noted “the improved price terms of this facility as well as the support and confidence from our banking partners.”
Investors, already well aware of plans for the new financing, sent shares of Penney’s down 3.4 percent to $8.69 in New York Stock Exchange trading Monday. The S&P 500 Retailing Industry Group was up 0.3 percent to 890.72.
The arrangement of the facility was co-led by Wells Fargo, Bank of America Merrill Lynch, J.P. Morgan, Barclays and Goldman Sachs.
Earlier this month, Moody’s Investors Service rated the revolver at “B1” and the term loan at “B2,” indicating the instruments were speculative in nature and subject to high credit risk. Moody’s expects low- to midsingle-digit sales growth for Penney’s this year and a continuation of operating losses for the next year to 18 months, but at “significantly” lower levels than in the recent past. In the first quarter, Penney’s trimmed its operating loss to $247 million from $486 in the prior-year quarter.
Margaret Taylor, vice president and senior credit officer for Moody’s corporate finance group, estimated that Penney’s would burn about $250 million of free cash flow this year, with that number rising to more than $425 million in a “downside” scenario and falling to breakeven under an “optimistic” model.
She said that cash and cash equivalents of $1.17 billion at the end of the first quarter and the new facilities “provide it with adequate liquidity that can support the potential range of free cash flow burn.”
However, “a very meaningful improvement” in gross margin will be necessary for Penney to achieve operating profit. In the first quarter, gross margin rose to 33.1 percent of sales from 30.8 percent in the 2013 period.
Penney’s nearest debt maturity comes next year when $200 million in 6.875 percent notes come due.
There'll be no rest for those headed to Europe for men's, as Paris just closed the gap with Milan. According to a provisional calendar released by the Chambre Syndicale, Paris Men's Week will now open a day earlier on January 16. See new highlights on the official lineup on WWD.com. #wwdnews #wwdfashion (📷: @kukukuba)
BREAKING: Jonathan Saunders is leaving @DVF. The designer has resigned from his position as chief creative officer of Diane von Furstenberg, the company said in a statement on Friday. At the time of his hire, von Furstenberg said Saunders’ arrival symbolized and facilitated her stepping back from the day-to-day duties that occupy the work of a full-time creative director. The British designer joined DVF in May 2016 and was in charge of all product categories. #wwdnews
For @versace_official’s spring ad campaign, the brand emphasized the archival prints from the spring tribute collection dedicated to the late Gianni Versace. Closing out the show were five of Gianni’s favorite models: Cindy, Naomi, Carla, Helena, and Claudia. Bowing on December 18, the new campaign is yet another tribute to supermodel-dom as the images by Steven Meisel are fronted by @iamnaomicampbell, @cturlington, @gisele and more. #wwdfashion
Four-time Oscar-nominated actress Annette Bening has been waiting 20 years to play Gloria Graham in "Film Stars Don't Die in Liverpool," which will be released on December 29. The movie about Graham – a Hollywood star known for her controversial relationship with a younger Englishman named Peter Turner – is based off a memoir Turned wrote. "She felt vulnerable to him, because she loved him, she really did love him. And anyone that we really truly are in love with, we re vulnerable to in a very deep way," said Bening. Read our full interview with the modern icon of an actress on WWD.com. #wwdeye (📷: @ninebagatelles; Styled by @cristinaehrlich)
The crisp white button down: a staple that can be dressed up or down and accessorized throughout the decades. Here, on a Art Basel-goer in 2017 on the left and on the iconic Audrey Hepburn in “Roman Holiday” in 1953 on the right. #tbt #wwdfashion (📷: Andrew Morales)
Known for her work with @victoriassecret, 25-year-old model @georgiafowler is raising her profile in Hollywood. Fowler stars in @vincecamuto’s holiday campaign, which launched in partnership with “Pitch Perfect 3.” “Almost every shoot with Vince Camuto, I’ve had to face a fear…It was definitely a challenge. I’m so grateful for it, though. I’ve always wanted to be a pop star, so that was the perfect chance,” Fowler said. Head to WWD.com to read about Fowler’s experience modeling, including at the #VSFashionShow, and her relationship with Nick Jonas. #wwdeye (📷: @jilliansollazzo)
EXCLUSIVE: Huda Kattan just became the first beauty influencer to land a major beauty deal. Kattan's business, @hudabeauty, has received a minority investment from private equity firm TSG Consumer Partners. The brand, which industry sources say is on track to do $200 million in retail sales for 2017, will receive support on product, retail and geographic expansion through the deal. Get all the details on the deal and read @_a_collins' interview with Kattan on WWD.com. Link in bio. (📷: @jgreenery) #wwdbeauty #wwdnews
Peruvian model @juanaburga_official – who is known for walking the runways of @rodarte, @viviennewestwood and @torybuch – is making the move to the big screen with drama “Los Últimos.” The film premiered in Argentina in November and arrives in the U.S. and Europe in 2018. On making the switch from modeling to acting, Burga told WWD: “It’s a completely different thing – a lot of people think it’s similar or try to connect things, especially like getting used to the camera or being looked at all the time or playing these different characrers, but film is a completely different story.” #wwdeye (📷: @jgreenery)
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)